There were 1,068 foreclosures last month, down 11.2 percent from October and the lowest since May. The figure was up 2.2 percent from a year ago, when the state required extra time be given to owners in distress. The high point of foreclosures was 2,004 in July 2008.

Notices of default, the first step on the way to foreclosure, numbered 2,122, down 16.3 percent from October but up 53.9 percent from 2008 numbers, also reflective of the state noticing requirements. Defaults rose as high as 3,832 in March as lenders dealt with a backlog of troubled loans.

DataQuick analyst Andrew LePage warned that the improving market may only be temporary if the backlog of mortgage delinquencies cannot be handled through loan modification. Banks report that hundreds of thousands of loans statewide are 90 days or more delinquent. Many experts expect a rise in defaults and foreclosures next year, even after many other loans are modified to keep qualified owners in their homes.

“There’s still a lot of unknowns in terms of what’s really happening and what’s likely to happen next year,” LePage said. “The question is: Is this the calm before the storm?”

San Diego State University adjunct professor Len Baron said he reads the lower foreclosure and default numbers as evidence that loan modification is working. He also said that high demand for low-cost property in San Diego is keeping unsold inventories low.

“We still have a lot of those (distressed properties) coming in the spring,” Baron said. “But there are enough people, I believe, from what I’ve seen, (to buy them).”

By contrast, he said demand is not as great in overbuilt markets such as Las Vegas, Phoenix and Miami.

“As I have believed for months and still do, I think prices are probably stabilized at this point,” Baron said. “They probably will stay where they are. There will not be a dramatic increase in price.”

The one weak part of the market is for homes selling above $500,000, Baron said, but he predicted banks will try to modify loans for those owners, as well. Prices may drop a bit, but not as severely as they have fallen already.

A national data firm agreed with Baron, predicting San Diego County home prices may rise 4.7 percent over the next year — nearly five times better than most major markets.

First American CoreLogic said the San Diego price level was down nearly 4.4 percent from October 2008 to October of this year, a slower slide than September’s nearly 6.9 percent year-over-year drop, according to the company’s LoanPerformance Home Price Index.

CoreLogic, the nation’s largest real estate data company, is a sister company to First American Corp.’s title insurance company and other financial services entities. Current price changes and the outlook are based on title records and other sales data collected by the company.

San Diego is faring much better than the national index, which was down 7.8 percent from year-ago levels and down 9.5 percent from September to September. The 45 largest metro areas will decline an additional 4.2 percent before bottoming out in March, the forecasters said, as foreclosures continue in most cities.

“However, improvement in both levels of inventories and unemployment are projected to prevail in the spring of next year, resulting in an average year-over-year appreciation of just under 1 percent by October of 2010 for these metropolitan markets,” the company said in its report.

Chief economist Mark Fleming was not available to explain San Diego’s relatively positive outlook for 2010, but other analysts have said high demand and limited supply of distressed properties are pushing up prices even as demand and price stability remain weak for higher-priced homes.

Besides San Diego, other areas expected to make the strongest recovery next year are San Francisco, up 5.7 percent, Los Angeles, up 5 percent, and Sacramento, up 4.6 percent, CoreLogic said.

The company does not publish prices as part of its index report, but San Diego-based MDA DataQuick has reported prices rising a little faster than CoreLogic’s index. The October median was unchanged from September at $325,000 and up 0.5 percent from October 2008.

Although San Diego’s overall default and foreclosure numbers were down, there were wide differences among neighborhoods, according to a DataQuick breakdown.

Foreclosures in Hillcrest-Mission Hills (ZIP code 92103) dropped from 39 in November last year to six last month. Paradise Hills (92139) was down by half to 15. But there were some increases: eastern Rancho Bernardo (91928), which went from four to 19; Rancho Peñasquitos (92129), seven to 15; City Heights (92105), 15 to 31; and downtown San Diego, 20 to 32.